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A PRIVATE COMPANY INTENDS TO SUE THE STATE FOR UP TO SK4.5 BILLION ON BEHALF OF SLOVAK CONSUMERS IN COMPENSATION FOR GAS RATE

The ratepayers' revenge

A BUREAUCRATIC error that allegedly led to over-billing by the SPP gas utility may end up costing Slovakia billions of crowns if a class-action suit being prepared by the Slov-Energia firm is successful.

A BUREAUCRATIC error that allegedly led to over-billing by the SPP gas utility may end up costing Slovakia billions of crowns if a class-action suit being prepared by the Slov-Energia firm is successful.

Slov-Energia's owners claim that the energy sector's state regulator failed to publish its natural gas rate increase for 2004 in the Collection of Laws, a step that is required before such decisions can take effect. As a result, the firm argues, the increases in the gas prices that Slovak households paid between 2004 and 2006 were not legally justified.

"It's as if some bureaucrat wrote down a price increase on a piece of paper and then just stuck it in his desk drawer," said Slov-Energia's front-man, managing director Marek Kainráth.

Miroslav Lupták, spokesperson for the Office of Network Industries Regulation, countered that following a legal analysis, the state had concluded that the suit was groundless. "The regulator followed the law in terms of both procedure and action," he said in early January. Lupták added that the state was prepared to go to court.

Slov-Energia estimates that 450,000 households in Slovakia use natural gas for heating. The firm claims that overpayments for gas deliveries during these years averaged Sk67,000 (€1,983) customer, making for total damages of Sk31.5 billion (€932 million).

However, to be successful in court, each claim must be fully documented. Because most people do not keep their gas receipts - and because SPP has reportedly been reluctant to issue back-invoices promptly - Slov-Energia does not expect to sign up more than 70,000 clients in the dispute, for total damages of about Sk4.5 billion (€133 million). The lawsuit must be filed this summer, or the statute of limitations will nullify some claims.

More than money

The firm will keep 40 percent of any award that is issued - potentially Sk2 billion, according to the figures - but Juraj Mác, Slov-Energia's executive officer, says the project is not entirely about money.

"The procedure followed by the Office for the Regulation of Network Industries was illegal," he said. "Paradoxically, this office was created to protect the interests of Slovak consumers, who individually are unable to negotiate a fair price with energy monopolies. So from the moral point of view, we are helping to set right a wrong. The state made a mistake, and people have a right to compensation."

The firm plans to run three campaigns, each of which will aim to sign up 25,000 clients. Hundreds of agents have fanned out across the country, and according to Mác were signing up 4,000 people a week as of the end of January, up from 800-1,000 a week in mid-December.

Mác said that his agents had reached informal deals with 33 town and village mayors, according to which the elected officials received a commission for each local household that was signed up. "How successful we are all depends on how the public responds to us," he said. "But last week, when I was in Dubnica nad Váhom [in Western Slovakia], I almost fell off my seat when I heard it a public meeting regarding the Slov-Energia contracts announced over the town's PA system."

Legal and budget issues

Constitutional lawyer Marek Benadík, who is cooperating on the project, said it will be the first class-action suit ever filed in Slovakia. "Our legal system does not specifically recognise class action suits, but neither does it forbid them," he said. "This case will thus set an absolute precedent, and regardless of whether we are successful, how we handle the legal challenges that we face will influence Slovak judicature in the future."

Kainráth said that if Slov-Energia won its suit, it would not necessarily mean a disaster for state budget planners, who are trying to keep fiscal policy tight as Slovakia bids to join the eurozone in 2009.

"There are various ways this receivable could be settled that do not tax the state budget," he said. "One would be for SPP itself to pay it, and then to work out a deal with the state to capitalise the debt in the form of shares." A consortium between Ruhrgas and Gaz de France currently owns 49 percent of SPP, with the state controlling 51 percent.

As the firm continues to roll out its initial campaign, Mác has begun to speculate on the advantages that might be derived from having his agents in direct contact with so many people.

"This project will put us in people's homes, which will give us an opportunity to talk with them about energy conservation," he said.

"Besides that, I am thinking about getting into politics, and this would be a great opportunity to find out about people's everyday concerns."

Mác, who currently runs the Metalurg steel factory on the premises of the defunct ZŤS weapons manufacturer in Dubnica nad Váhom, says if he did launch a political party, it would be left of centre and focused on environmental themes, and would contest the next scheduled elections in 2010.

"The party would also be based on communication rather than on running the state in an authoritarian manner," he said.